Bold move into oil sands

Teck Cominco made its first, bold move into the Athabasca oil sands last September, when it purchased 15% of the Fort Hills Project. This is the first of three to five long-life assets that CEO Don Lindsay is looking for to renew and grow the company. With a mine life of 30 to 40 years, and everyone believes it may last longer, this is a project that will propel a major part of Teck Cominco’s evolution.

Teck Cominco paid $475 million for its share of Fort Hills, and is committed to spending another $2 billion toward exploration, engineering and development. The project is operated by Petro-Canada, which owns a 55% share. UTS Energy Corp. holds the remaining 30%.

Located 90 km north of Fort McMurray, Alta., the Fort Hills leases contain 2.8 billion barrels of bitumen resources. Regulatory approval has been given to develop a 100,000-bbl/day mine and extraction plant that will come onstream by the end of this decade. The investment to get Fort Hills up and running will be $5 billion, only about 40% of which will be spent on the mine and extraction plant near Fort McMurray. The balance will be used to build an upgrader near Edmonton. In the future, the partners expect to spend another $5 billion to boost capacity to 190,000 bbl/day.

Teck Cominco has looked at investing in the oil sands several times over several years, but the timing was not right until last year. The Fort Hills project fits the company’s desire to diversify; the company has high confidence in the strength of oil prices; and it had the money in its treasury.

Teck Cominco’s Glen Duthie has been seconded to Petro-Canada as Fort Hills manager of mining. He was most recently general manager at the Elkview coal mine, and before that worked at Sullivan, Pine Point, Quintette, Equity Silver, Endako and Antamina. This mining experience is the expertise that Teck Cominco brings to the Fort Hills partnership.

Big numbers

In a March interview with CMJ, Duthie pointed out, “The scope of this project is massive. The three original Fort Hills leases cover 190 km2, much of which contains recoverable bitumen. In fact the challenge for engineers is finding suitable waste disposal sites.”

There will be large numbers of mining equipment. The production fleet may eventually include 15 to 18 shovels with 44-m3 buckets, and 70 to 80 haulage trucks “as big as we can get them,” he added, “and assuming we can get tires.”

The mining rate, too, is made up of big numbers. The first phase, getting a 170,000-bbl/day operation going, will mean moving 800,000 to 900,000 tonnes of material each day in the mine. If capacity is expanded to 270,000 bbl/day, the mining rate will be more than 1.2 million tonnes/day.

“[Mining] is a material-handling problem,” said Duthie. Even if cost-per-tonne is low, multiply that by a million tonnes each day, and the numbers quickly add up. He will apply everything he knows about keeping costs under control, starting with minimizing the length of haulage, particularly for waste.

Fort Hills will eventually provide approximately 2,500 permanent jobs.

“It all comes down to people. The trick will be to attract, train and retain a quality labour force,” Duthie said. “Fort Hills is surrounded by other oil sands projects, so what sets us apart?”

Big questions need to be answered if Fort Hills is to compete for skilled workers, whose numbers are shrinking. “How do we staff it? Do we fly in? Do we build another town? Do we consider a combination of the two?” he mused. “We have to get our name in the queue to buy equipment and find staff.”

The environmental challenges facing the Fort Hills developers are big as well. The leases cover ground with several unique features. There are pioneer cabins. There are historical sites where the earliest bitumen production was recorded. There are unique patterned fens that must be preserved. Fortunately, the fens lie on the northeast corner of the leases, an area that will not be mined until late in the project, so there is time to study and understand them.

Duthie says that a thorough understanding of groundwater is critical to environmental planning. McClellan Lake is nearby, and it is groundwater that seeps up into the fens. “We will take all necessary measures to ensure seepage mitigation is effectively managed,” he added.

Next steps

Teck Cominco’s experience with large open pit development is already coming into play in mine planning at Fort Hills. The project originally covered three oil sands leases, Nos. 3, 8 and 52. Two more leases (Nos. 437 and 438) have been added for overburden and tailings storage. Without these extra leases, it would take 10 years of mining to clear enough room to establish tailings and overburden areas, said Duthie. “We are in the unique position of hoping there’s no economically recoverable bitumen on these additional leases,” he added.

Previously, only the bitumen content of the oil sands in the leases has been tested. Now work begins in earnest to study the potential fines content of the tails, how to establish an out-of-pit tailings area, and all the other details that will lead to the creation of a successful and responsible mining operation.

Knowing that the bitumen content is 11%, designers will consider which of several upgrading technologies might be most productive at Fort Hills. No decisions on the upgrader flowsheet have been made yet, but when they are, some will certainly reflect Teck Cominco’s vast mineral processing expertise.

Ultimately Teck Cominco would like to have a larger presence in the oil sands industry. Until that time, the company is learning all it can from its partners in return for its mining expertise.

---